LONDON: Oil prices jumped $2 on Friday after the US tightened its sanctions program against Russian crude exports, raising supply concerns in an already tight market, and global inventories are forecast to decline through the fourth quarter, according to Reuters.
Brent futures rose $1.96, or 2.28 percent, to $87.96 per barrel as of 11:19 a.m. Saudi time. US West Texas Intermediate crude gained $1.98, or 2.39 percent, to $84.89 a barrel. Both benchmarks had earlier hit gains of $2.
Despite fluctuations through the week in both benchmarks, Brent was set for a weekly gain of almost 4 percent, while WTI was set to climb over 2.5 percent for the week, after both contracts surged on Monday.
The uptick was driven by the potential for disruptions to Middle Eastern exports after Palestinian militant group Hamas’ attack on Israel at the weekend threatened a possible wider conflict.
“(A) geopolitical risk premium still lingers around the corner that is likely to support oil prices in the short-term,” said Kelvin Wong, senior markets analyst at OANDA in Singapore.
The market was most concerned about supply constraints from the Middle East and Russia, said Wong.
On Thursday, the US imposed the first sanctions on owners of tankers carrying Russian oil priced above the G7’s price cap of $60 a barrel, to close loopholes in the mechanism designed to punish Moscow for its invasion of Ukraine.
Russia is the world’s second-largest oil producer and a major exporter and the tighter US scrutiny of its shipments could curtail supply.
Also on Thursday, the Organization of the Petroleum Exporting Countries kept its forecast for growth in global oil demand, citing signs of a resilient world economy so far this year and expected further demand gains in China, the world’s biggest oil importer.
“Supply side issues remained the focus in the crude oil market,” Daniel Hynes, senior commodity strategist at ANZ, said in a note on Friday, adding that prices during early trade on Friday rose on the stronger US sanctions enforcement.
“Sentiment was also boosted after OPEC said it expects crude stockpiles to slump by 3 (million barrels per day) this quarter. That assumes that there are no further supply disruptions emanating from the Israel-Hamas war,” Hynes said.
Oil prices also shrugged off data released on Friday showing a month-on-month decline in Chinese crude imports.
